Ethics In Leadership: Lessons From The Rise And Fall Of Enron

Leadership is important in every organization or business

Discuss about the Leadership Case study of Enron.

Leadership is important in every organization or business. Leaders are involved in the steering of the business towards the achievement of the business goals. The growth of a business is one of the focal points that leaders emphasize on (Northouse 2010). This essay shall focus on the ethics in leadership with a focus on the study of Enron. The paper purposes to deduce the responsibility of failures that led to the collapse and final bankruptcy of the most giant company during its time.

The leadership of any organization should be geared towards ensuring effectiveness of the organization. It is therefore significant for the leaders to adopt servant leadership that focuses on the plight of the employees. The leaders should incorporate business ethics and corporate responsibility in the management of the organizations. Good leadership should incorporate clear communication canals between the leaders and employees. The employees also have a responsibility of communicating their needs to the leadership for amicable resolution. A transformational and democratic leadership style should be encouraged by ensuring that employees take part in the decision making process within the organization (Kipling 2008). The process of making decisions in the organizations should be done in a transparent manner and not the way it was done in Enron company.

Enron is reported to be one of the leading failures in the business history of United States. Despite the fact that poor accounting practices had been blamed for the failure, the practices were actually driven by the leaders and hence poor leadership Northouse 2010). Researchers have alluded to several reasons for the failure of Enron that include ethics followed in the company, trading practices and corporate governance within the organization (Clarke 2009). Reports and research has shown clearly how the two leaders Jeffrey Skilling and Kenneth Lay were responsible for the failure and subsequent demise of Enron. Some of the authors such as Jenkins (2003) indicated that the actions of the top leaders led to the loss of confidence in Enron. All the lapses within the organization took place since the leadership of Skilling and Lay promoted the achievement of the short-term goals at any cost. They engaged in various activities that eroded the culture and subsequently led to the fall of the company. The leadership put the employees and the companies at risk through the engagement of malicious activities. They also took part in financial tweaking aimed at inflating the performance of Enron. Further, the top leadership ensured they earned their incentives even in bad times without considering other employing and the company. Finally, once the leadership had noticed that the company was going down; Kenneth Lay started selling the company shares to investors and employees. The leadership can be rated to have performed poorly in the context of leadership principles.

The importance of ethics in leadership

As indicated in the videos, the systems involved (organizational, social, legal and political) had not put adequate requirements in place to support a results-based leader. However, this paper provides suggestions on how the leadership should have prevented the collapse of Enron. Leaders should be involved in the motivational processes and reward systems of the employees. Leaders should motivate the employees through involving them in making decisions in the operations and management of the organization. Thus even in the implementation of the decision formulated, the employees feel as if the strategy is their own which leads to their increased motivation in ensuring the success of the strategy (Adair 2006). Another way in which leaders can motivate the employees is by the enhancing the safety of the work place. In this regard, employees work knowing that nothing is detrimental to their health or safety hence they are only concerned within the attainment of the organizational goals. Furthermore, the leadership should practice ethical leadership standards to ensure that the decisions made are for the benefit of the employees and the company.

Leaders should adopt a reward system that ensures that employees are happy given that happy employees are known to be productive employees. This ensures that the employees are enthusiastic in the dispatch of their duties hence culminating into the success of the organization (Clarke 2009).  Leaders should reward employees who deserve the rewards with an aim to challenge the other employees in achieving results that call for rewards. The reward approach should conform to the business capabilities and should not be lower than the expectation of the employees as this may be detrimental to the success of the business (Northouse 2010).

The past employer had some systems and accountability elements handled by the RBL standpoint. The leaders should come up with organizational structures that takes care of achievement of the organizational goals and not individual goals has seen in the Enron company. Hierarchical structure of the organization should be geared towards clear flow of information and checks and balances (Klimoski & Zaccaro 2001). Leaders in the company are involved in the formulation of the effective organizational structures. The leaders should determine the goals of the formulated organizational structure and relate the structure to the function and purpose of the organization. The leaders make an observation of the organizational structure from the tactical and the strategic perspectives (Whiteman 2004). Therefore, the leaders ensured that conflict of interest is eradicated between the needs and requirements of the business with the organizational structure. Leaders identify the organizational structure which the organization needs and thereafter mark out the organizational structure using a flow chart.

Nevertheless, the organization lacked clear communication channels which are vital in leadership. Leaders should ensure there is effective communication in the organization structure and that for an organizational structure to be effective, clear communication channels should be instituted to enhance the clear understanding of what is involved the organizational structure. Effective communication leads to the efficiency in the implementation of the deduced organizational structure.

Conclusion

Leaders are vital pillars in the success of any business. They are involved in the regulation of all the activities in any business regardless of the size. They are involved in the motivating the employees and in the establishment of an effective organization structure. The leaders should ensure that the organization structure is based on the organizational goals and objectives. In this case, conflict of interest is avoided if the leaders institute an effective organizational structure. This could have saved the collapse of Enron Company.

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Northouse, P. G. (2010) Leadership: theory and practice. Thousand Oaks: Sage Publications.

Jenkins, R. R. (2003) Crisis in confidence in Corporate America. America Journal of Business. Vol 18(2), pp 5-7.

Klimoski J. R. & Zaccaro J. S. (2001) The nature of organizational leadership: understanding the performance imperatives confronting today’s leaders. San Francisco: Jossey-Bass

Kipling R. (2008) The UK Model of corporate governance: An assessment from the Midst of a financial crisis. London: Financial times, 2008.

Whiteman, G. L. (2004) Management skills workshop. Madison: Business & Legal Reports.

Clarke T. (2009) European corporate governance: readings and perspectives. London: Taylor & Francis.